Opec holds firm on oil demand projections amid economic growth expectations

Non-Opec crude production this year is now projected to grow by 1.1 million bpd, down 120,000 bpd from an earlier projection

Opec raised its estimate for global economic growth this year to 2.8 per cent, from 2.7 per cent previously. Reuters

Opec on Tuesday stuck to its oil demand growth forecasts for 2024 and 2025, but said that it expects the world economy to grow at a faster pace this year, driven by the US and India.

The group has forecast oil demand growth of 2.2 million barrels per day for this year and 1.8 million bpd for 2025.

Both were unchanged from last month’s assessment, Opec said in its latest monthly oil market report.

However, Opec raised its estimate for global economic growth this year to 2.8 per cent, from 2.7 per cent previously, citing “robust” expansion in economic activity in the second half of 2024.

“While the US, India, and, to some extent, Brazil showed strong growth in 2H23, with China and Russia at steady levels towards the end of the year, the eurozone and Japan experienced a decline,” the group said.

“However, some tentative signals suggest a potential economic growth rebound in the latter two economies, indicating a continued sound trend in [the first quarter of 2024].”

Non-Opec crude production this year is now projected to grow by 1.1 million bpd, down 120,000 bpd from last month's estimate.

The forecast cut is due to the extension of additional voluntary output curbs into the second quarter, the group said.

This month, several members of the Opec+ group oil producers, including Saudi Arabia, the UAE and Kuwait, announced that they were extending oil output cuts of 2.2 million bpd as part of efforts to support market balance and stability.

Production by core Opec members, which now excludes Angola, increased by 203,000 bpd in February from the month before to average 26.57 million bpd, the group said on Tuesday.

“Opec continues its policy of announcing cuts or cut extensions right before customers come in with orders for the following month, and makes decisions that are data dependent,” Francisco Blanch, BofA’s head of global commodities, told The National last week.

“The group is indeed more bullish on demand than the International Energy Agency.”

The Paris-based agency expects oil demand to grow by just 1.2 million bpd this year due to higher supply from non-Opec sources and a slowdown in Chinese consumption.

“We believe it is likely that [Opec’s] voluntary production cuts will stay in place if global demand growth stays in the 1.2 million bpd range as opposed to Opec’s own demand growth forecast of 2.2 million bpd,” Mr Blanch said.

On Monday, Opec secretary general Haitham Al Ghais said that eliminating oil use would affect global economic growth, hurt millions of jobs and destroy industries that rely on the fuel.

“Of course, everybody wants to see greenhouse gas emissions reduced. Opec believes that technological solutions and efficiency improvements can play a vital role,” Mr Al Ghais said.

“It is important we all fully understand the immense benefits that oil, and the petroleum products derived from it, continue to provide to people and nations across the world.”